Pyramid Structure versus Pyramid Scheme

One of the most common objections to Network Marketing companies is the pyramid argument. Many people will argue that Network Marketing companies are 'pyramid schemes' but that is not usually the case. If it is, they will be closed down fairly quickly.

There is a big difference between 'pyramid structure' and 'pyramid scheme'. Almost every business has a pyramid structure. If you look at a typical corporate organization chart, you will see one person at the top, a few underneath that person, and then it fans out into... a pyramid. Even if you look at a sales organization, you'll see that senior sales people get commission overrides from the people underneath them. That sounds like a downline structure in Network Marketing.

A Pyramid Scheme on the other hand is illegal. It is where all the money is being made from signing up other people, with little or no real product ever being sold or delivered. Some will argue that that certain MLMs border on this. The business emphasis on many MLMs is so heavily placed on the opportunity that the product seems unimportant. Or it's difficult to buy the product without hearing about the opportunity.

Legitimate Network Marketing companies will focus on significant product movement along with selling the opportunity. That's a balancing act, and those that cross that line to 'scheme' will likely have authorities to deal with. Since many home based business opportunities are network marketing companies, you may need to look closely at this when you evaluate an opportunity.